Orders Strong, But Becoming Shorter

Jim Phillips, Yarn Market Editor

B usiness remained brisk into April for many U.S. yarn spinners despite continued high raw
material prices.

"It's still hard to find ring-spun," said one yarn broker. "You can find more availability
in open-end [OE], but you still might have to contend with an extended delivery schedule. Ring-spun
prices are stable. With most mills oversold, they aren't coming off their prices, even though there
have been a few small dips in cotton prices over the past month."

Another spinner noted: "OE is easier to find, and prices vary somewhat. What's really
strange right now is that it seems that OE is not as closely tied to the price of cotton as
ring-spun. That may be attributable to the fact that some of the really big spinners haven't had to
pay $2.00 a pound for their cotton yet. It will be interesting to see what happens when they get
there."

An industry observer said: "We don't have enough ring-spinning capacity in this
hemisphere to keep up with the current demand. As long as the market stays the way it is, customers
are going to have to accept higher prices and longer wait times."

The price of cotton, however, which has hovered near or over $2.00 per pound since the
beginning of the year, is beginning to make some customers look for other options. "I've seen a
number of my customers look to both synthetics and imported cotton to try to find ways to reduce
the cost," said one yarn seller. "But they have met only limited success. Prices from Asia have
gone up considerably as well in the past year. The cost of synthetic yarn has increased almost in
parallel with cotton, so there are not that many opportunities to realize significant cost savings
in that direction."

Said a Carolinas spinner: "Business is brisk right now, but orders are becoming shorter
again. A number of customers are waiting now for cotton prices to come back down. They are not
committing for late third quarter and fourth quarter. My concern is that if they wait too long,
product won't be available when they come back."

Central America Remains Robust Business remains brisk not only in the United States, but in Central America as well.
"Orders for Central America are strong right now," said one international yarn broker. "A lot of
retailers want to move more business to the region. Even though prices in Asia are high, yarn is
still more expensive in the United States and Central America. But there are, of course, other
factors to consider than price."

He continued: "I've had a number of conversations over the past few weeks that indicate that
the weaker conditions at retail may actually become advantageous to the domestic supply chain. It
is keeping customers from committing to long-term, large orders offshore. They want smaller orders
close by when they can get a relatively quick turn. And they don't want to have to pay for the yarn
as early. It's a lot better for them to be able to pay seven days before delivery than 30 or 60
days before delivery."

Cotton Prices Dip Spot cotton quotations for the base quality of cotton averaged $1.9511 cents per pound for
the week ended Thursday, April 14, in the seven designated markets measured by the U.S. Department
of Agriculture. This was down from $1.9688 the previous week, but it is more than $0.73 per pound
higher than it was the same period a year ago.